think20_papers_2014 (1)

POLICY RECOMMENDATIONS FOR
THE BRISBANE G20 SUMMIT
PAPERS 2014
THINK20

First published 2013 for the Lowy Institute for International Policy by
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Contents
About the Lowy Institute ..................................................................... vi
Abbreviations...................................................................................... vii
Overview.................................................................................... 1
Policy proposals for the Brisbane G20 Summit
Mike Callaghan .................................................................................... 3
The G20 economic/finance process ........................................ 17
1. Sustainable growth and the stability of oil prices – the Kingdom
of Saudi Arabia’s objectives
Mustafa Alani ........................................................................... 18
2. Global rebalancing, financial risk assessment and the G20
Colin I. Bradford ...................................................................... 23
3. The Brisbane Summit needs to deliver a G20 coordinated
growth strategy
Mike Callaghan ......................................................................... 29
4. Introducing a forward-looking component to the G20 leaders’
agenda
Mike Callaghan ......................................................................... 34
5. Post-growth societies for the 21st
century
Lucas Chancel............................................................................ 37
6. Strengthening the peer review of the G20 Mutual Assessment
Process
Katharina Gnath and Claudia Schmucker ................................. 43
7. G20 economic priorities for 2014: reforming the MAP
Stephen Pickford ....................................................................... 49
8. A more inclusive G20 economic policy coordination
mechanism is possible
Guven Sak ................................................................................ 58

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9. The threats of transition, and the need to speed up the
building of a robust market infrastructure
José Siaba Serrate ...................................................................... 63
10. The macroeconomic development of, and prospects for, the
G20 countries
Pavel Trunin .............................................................................. 70
11. The G20 MAP, fiscal austerity and financing for investment
David Vines .............................................................................. 75
12. G20’s three steps towards strong, sustainable and balanced
growth of the world economy
Ye Yu ......................................................................................... 82
Trade liberalisation ................................................................. 89
13. The fear of fragmentation
Alan S. Alexandroff ................................................................... 90
14. Strengthening global trade liberalisation: enhancing the G20’s role
Peter Draper .............................................................................. 97
15. Toward more open international trade: the G20’s responsibility
Shinichi Kitajima ..................................................................... 103
16. The G20 trade agenda: proposals for the Australian presidency
Ivan T.M. Oliveira ................................................................... 108
17. Near future for international trade: who’s behind the
wheel – the WTO or regional trade agreements?
Andrés Rozental ...................................................................... 114
18. The G20’s role in addressing the WTO’s predicament: seeking
political compromise and strengthening the multilateral
trading system
Yong Wang .............................................................................. 119
Financing for investment/infrastructure.............................. 125
19. Financing infrastructure investment: old roads and new paths?
Robert J. Bianchi and Michael E. Drew .................................. 126

v
Contents
20. Financing for investment in Africa: a role for the G20
Chijioke Oji and Catherine Grant Makokera .......................... 135
21. Connectivity matters for the G20
Sarp Kalkan ............................................................................. 142
22. A 7-point plan for the G20 infrastructure financing agenda
Daniela Strube ........................................................................ 148
23. Infrastructure development: the role of East Asian regional
institutions in managing capital flows through financial deepening
Maria Monica Wihardja .......................................................... 155
Development ......................................................................... 163
24. The G20 and development
Barry Carin.............................................................................. 164
25. The G20 and its outreach: new measures of accountability,
legitimacy and success
Susan Harris Rimmer .............................................................. 173
26. The G20, climate financing and the UNFCCC COP21
meeting in Paris
Hugh Jorgensen ....................................................................... 183
27. Advancing accountability for development and growth
John Kirton ............................................................................ 190
28. Strong, sustainable, balanced and inclusive growth –
a cornerstone of development
Marina Larionova ................................................................... 197
29. The development agenda for the Brisbane G20 Summit
Wonhyuk Lim ......................................................................... 203
Appendix A: Participants .................................................................. 209
About the G20 Studies Centre........................................................... 212
About the editors .............................................................................. 213

vi
About the Lowy Institute
The Lowy Institute for International Policy is an independent policy think
tank. Its mandate ranges across all the dimensions of international policy
debate in Australia – economic, political and strategic – and it is not limited
to a particular geographic region. Its two core tasks are to:
produce distinctive research and fresh policy options for
Australia’s international policy and to contribute to the wider
international debate.
promote discussion of Australia’s role in the world by providing
an accessible and high quality forum for discussion of Australian
international relations through debates, seminars, lectures,
dialogues and conferences.
Funding to establish the G20 Studies Centre at the Lowy Institute for
International Policy has been provided by the Australian Government.
The views expressed in this publication are entirely the authors’ own
and not those of the Lowy Institute for International Policy or of the G20
Studies Centre.

vii
Abbreviations
3G Global Governance Group
AAF Accountability Assessment Framework
ABF2 Asian Bond Fund 2
ABMI Asian Bond Market Initiatives
AfDB African Development Bank
AIF ASEAN Infrastructure Fund
AMIS Agricultural Market Information System
AOSIS Alliance of Small Island States
APEC Asia–Pacific Economic Cooperation
APFF Asia Pacific Financial Forum
APIP Asia–Pacific Infrastructure Partnership
AR5 IPCC Fifth Assessment Report
ASEAN Association of Southeast Asian Nations
AU African Union
BRICS Brazil, Russia, India, China and South Africa
CGIF Credit Guarantee and Investment Facility
DDA Doha Development Agenda
DDR Doha development round
DSB Dispute Settlement Body
DSM Dispute Settlement Mechanism
DWG Development Working Group
EPA Economic Partnership Agreement
FDI foreign direct investment
FSB Financial Stability Board
FSF Financial Stability Forum
FSSBG framework of strong, sustainable and balanced growth
FTAAP Free Trade Area of the Asia-Pacific
FTAs free trade agreements
FWG Framework Working Group
GATT General Agreement on Tariffs and Trade
GEPF Government Employees Pension Fund

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viii
GFA Global Framework Agreement
GFSR Global Financial Stability Report
GIIPS Greece, Italy, Ireland, Portugal and Spain
GPA Government Procurement Agreement
GPFI Global Partnership for Financial Inclusion
GPGs global public goods
GVCs global value chains
ICT information and communications technology
IDC Industrial Development Corporation
IIRSA Initiative for the Integration of the Regional Infrastructure in
South America
IMF International Monetary Fund
IMFC International Monetary and Finance Committee
ISA International Services Agreement
ITA Information Technology Agreement
LCBM local currency bond market
LDCs least-developed countries
LIC low-income country
LSCI Liner Shipping Connectivity Index
LTIF long-term investment fund
MACS Meetings of Agricultural Chief Scientists
MAP Mutual Assessment Process
MC8 8th WTO Ministerial Conference
MDBs Multilateral Development Banks
MDGs Millennium Development Goals
MFN most-favoured-nation
MIA multilateral investment agreement
MPAC Master Plan for ASEAN Connectivity
MYAP Multi-Year Action Plan on Development
NAFTA North American Free Trade Agreement
NEPAD New Partnership for Africa’s Development
NMT non-motorised transport
OECD Organisation for Economic Co-operation and Development

Abbreviations
ix
OTC over-the-counter
PAP Priority Action Plan
PIDA Programme for Infrastructure Development in Africa
PIF Pacific Islands Forum
PPF project preparation facility
PPPs public–private partnerships
PTAs preferential trade agreements
QE quantitative easing
RCEP Regional Comprehensive Economic Partnership
RFAs regional financial arrangements
SDC Seoul Development Consensus
SDRs Special Drawing Rights
SIDS Small Island Developing States
SIFIs systemically important financial institutions
SMEs small and medium enterprises
SOEs state-owned enterprises
SSA Sub-Saharan Africa
SSBG strong, sustainable and balanced growth
SWFs sovereign wealth funds
TPP Trans-Pacific Partnership
TRIMs trade-related investment measures
TTIP Trans-Atlantic Trade and Investment Partnership
UNCTAD United Nations Conference on Trade and Development
UNDP United Nations Development Programme
UNECA United Nations Economic Commission for Africa
UNFCCC United Nations Framework Convention on Climate Change
WEF World Economic Forum
WEO World Economic Outlook
WTO World Trade Organization

3
Mike Callaghan1
The ‘Think20’ involves think tanks and academics from G20 countries.
The first Think20 meeting was held in Mexico in February 2012, under
the Mexican presidency. Russia continued the process when it assumed
the G20 presidency for 2013, with a Think20 meeting in Moscow in
December 2012.
Australia believes that the Think20 is a valuable aspect of the G20
and that it can provide an important analytical input into the process. As
such, Australia is continuing with the Think20, as well as strengthening
the concept over the course of 2014.
The first Think20 meeting under the Australian G20 Chair will be
held in Sydney on 11 December 2013. The list of participants is outlined
in Appendix A.
Participants in the Think20 2014 were asked to provide, in advance of
the meeting on 11 December 2013, a short paper on at least one of four
broad G20 themes. The themes were:
the G20 economic/finance process
trade liberalisation
financing for investment/infrastructure
development.

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Each participant was asked to identify what the G20 should seek to achieve
in 2014 in the area they have chosen, and what they consider could be an
achievable outcome from the Brisbane summit. In particular, participants
were asked to identify specific actions they consider should be taken by
the G20. The specific policy proposals are to be discussed at the Think20
meeting on 11 December 2013.
The papers submitted by participants in the Think20 meeting are
attached. Following is a summary of some of the challenges and policy
proposals identified in the papers. The outcome from the Think20 meeting
will be submitted to Sherpas.
Think20 participants will also maintain a dialogue on these issues
during the course of 2014.
Session 1: The G20 economic/finance process
Challenges
Five years after the crisis, it is clear that the global recovery will
be arduous and protracted.
The IMF stated in its recent WEO that ‘global growth is still
weak, its underlying dynamics are changing, and the risks
to the forecasts remain to the downside. As a result, new
policy challenges are arising and policy spillovers may pose
greater concerns.’
The global risks include financial imbalances and excessive levels
of government debt, and increased volatility of capital flows and
exchange rates, as well as rapid growth in some asset prices.
The phasing down of quantitative easing and the rise in interest
rates will pose major challenges to the global economy.
Economic growth has been declining for the last forty years in
developed countries, and a weak growth situation could well
persist or even worsen.
Income inequality is rising.

5
The G20 has struggled to deliver a clear, consistent and
coordinated message as to how members are cooperating to
restore growth and create jobs. It has not lived up to the high
ideals of the Framework.
Pressures toward fiscal austerity in many places are impeding
the global recovery, and are leading to countries acting in a
non-cooperative manner by seeking to expand demand through
export growth, propelled by currency depreciation.
International cooperation and coordination have a crucial
role to play, but policies are ultimately set according to
national circumstances.
It is outside the remit of the G20 presidency to force member
states to commit to national rebalancing and growth measures
that are domestically unpopular or unfeasible. Nor is the G20
presidency in a position to make member states agree on a
common vision for the global economy when they diverge in
outlook and economic philosophy.
The MAP may be meaningful in enhancing member states’
commitments, but it has had minimal impact in binding
their hands.
There is not an institutional setting for a fully integrated
evaluation of global rebalancing, regulatory reform and financial
risk assessments. The current disjointed arrangements could
result in governance ‘voids’.
Possible policy options
Give priority to the request by leaders at St Petersburg for
Finance Ministers to develop comprehensive growth strategies
for presentation at the Brisbane summit. Emphasis should be on
developing ‘coordinated’ growth strategies. This would be an
opportunity to place the Framework at the centre of the G20’s
activities. A ‘coordinated G20 growth strategy’ could be released

Think20 Papers
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at the Brisbane summit, with each country submitting its specific
growth strategy, including recognition of spillovers.
Introduce a G20 early warning system to detect and monitor
potential threats, including possible spillovers.
Invite a wider array of parties to participate in MAP discussions,
including members of international labour advocacy groups,
business groups and women’s rights groups, to ensure that
the concerns of these groups are integrated into the global
policy discourse.
Intensify the work on strengthening financial safety nets
(firewalls), including the operation of the IMF and cooperation
between the IMF and regional financing arrangements (RFAs).
Strengthen the MAP process by: obtaining specific and
timely commitments from G20 members, with a focus on
spillovers; expanding discussions based on an ‘explain and
justify’ approach; introducing clear timetables and a bilateral
monitoring process, not only for assessing the proposed
commitments, but also for reviewing implementation; and
streamlining the publication of final MAP results into one
coherent G20 document.
Recognise that most Finance Ministers do not have domestic
responsibility for structural reforms, and open up the Finance
Ministers’ process so that other ministers directly responsible for
the reforms being discussed can attend on an ‘as needed’ basis.
Improve ministerial oversight of international financial
regulation by having the G20 Finance Ministers meeting that
takes place at the time of the spring and annual IMF meetings
focus on financial regulation. This would remove the current
duplication associated with back-to-back meetings with
the IMFC.
Incorporate into the agenda for the summit a specific session
where leaders reflect on the future challenges for economic

7
management from likely corporate and technological
developments and the further integration of economies.
Encourage countries to increase public investment in
infrastructure and to facilitate increased private financing
of infrastructure.
Session 2: Trade liberalisation
Challenges
International trade negotiations are at a crucial stage.
Multilateral negotiations, led by the WTO, are in crisis, with
regional and sub-regional trade negotiations filling the vacuum.
The Bali Ministerial conference that will take place a few days
before the Think20 meeting is the last opportunity for the WTO
to salvage at least part of the Doha round.
Making progress towards concluding the Doha round is essential
for the credibility of the entire G20 process, as this issue has
been on the agenda for several summits without any significant
progress having been made.
It is nearly impossible to obtain consensus in a 159-member
club (the WTO), where members have such different levels of
development and integration into the world economy.
G20 Trade Ministers’ interactions are infrequent and brief.
These are also the same ministers who have presided over the
Doha impasse.
Underneath the Doha impasse are several intractable structural
and geopolitical dynamics that block progress. Removing these
blockages requires strong political will, leadership and collective
sacrifice – qualities so far absent.
Because of the lack of progress at the multilateral level, a trend
to prefer regional trade agreements (RTAs) over multilateral
negotiations is inevitable.

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Mega-regional trade arrangements carry the dangers that
the parties will be substantially distracted from multilateral
approaches to liberalisation, while further alienating key
developing countries not included in the processes. At
the same time, they may also contribute to strengthening
trade liberalisation.
Although G20 member states have recognised the significance
of fighting protectionism since 2008, protectionist measures are
still prevalent, particularly ‘murky protectionism’. Of the total
number of trade-restrictive measures implemented since October
2008, only 19 per cent have been eliminated.
The G20 should encourage members to share information
regarding RTA negotiations that they are participating in with
other G20 countries.
The inter-agency work program evaluating protectionist
measures by G20 members should be continued and
widely publicised.
A peer review process should be established within the G20
to monitor adherence to the standstill commitment, which
will provide an additional incentive for leaders to abide by
the commitment.
G20 leaders should take steps (to be verified in the inter-agency
reporting process) to give effect to the commitment to roll back
existing protectionist measures.
One way or another, the Doha round should be ‘concluded’ in
2014. If there is no agreement at the WTO Ministerial meeting
in December 2013, the G20 will need to seize the initiative
regarding the future of the multilateral trading system.
The G20 should extract from what is left of Doha a basket
of issues amenable to intra-G20 compromises and, where

9
possible, that contains broader appeal to the rest of the
WTO membership.
The discussion of the future of the WTO should be deepened,
anchored by the governance of global value chains (GVCs) and
their implications for international trade negotiations. This
conversation should include: the identification of negotiating
issues, incorporating both rules and liberalisation; the work
of the World Economic Forum and World Bank on a ‘GVCs
plurilateral’; and the needs of the poorest countries in relation to
plugging into and upgrading within GVCs.
Discussions should be held about the resort to plurilateral
negotiations as a key mechanism to sustain the WTO’s position
at the apex of the global trading system.
Serious efforts should be made to make the RTAs congruent
with building multilateralism.
Concrete mechanisms for reviewing RTAs in the WTO should
be defined.
Serious conversations should begin on the future of multilateral
investment governance under the auspices of the WTO.
Agriculture should be included in mega-regional trade deals. Any
reduction in distortions can ultimately be expected to benefit
developing countries as well.
Support should be given to developing countries to enable them
to gain the required expertise to deal with the WTO Dispute
Settlement Mechanism.
A G20 working group on international trade should
be established.
An independent standard body, linked to the WTO, should be
established to develop model clauses, treaties and practices for
trade and investment agreements.

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Session 3: Financing for investment/infrastructure
Challenges
Despite widespread accord regarding the economic benefits of
infrastructure investment, there remains a substantial deficit in
new infrastructure globally.
The problem may be shared by countries, but the reasons differ.
For some, limitations might lie in an inefficient financial sector
(for example, interest rate controls and limited market access); for
others, the government may be the bottleneck; while for others,
the incentive structure may not favour long-term investment.
Any new model of infrastructure financing must directly address
current concerns surrounding the level of public debt around
the world.
An important headwind facing the development of new paths
for infrastructure is that bank finance may be limited as a result
of changes in global bank regulation and the direct issuance of
bonds will be vital in the current investment climate.
Many developing countries do not have deep financial markets.
Financing regional or cross-border infrastructure projects is a
particular problem for developing countries.
Public–private partnerships (PPPs) are highly complex and require
advanced capacity within the public sector to both negotiate and
manage. This is a problem for developing countries.
A challenge facing East Asia is that of recycling countries’ excess
saving from foreign exchange reserves within the region into
more productive investment.
While there is a focus on accessing pension funds as a source of
infrastructure financing, private sector investors face numerous
risks when evaluating a new investment proposition. Pension
funds are conservative and largely focus on low-risk investments
– they are reluctant to finance new infrastructure investment.

11
Infrastructure investment is not a global public good. The
immediate effects that it generates are localised or, at most,
regional. It therefore requires a regional approach and the
G20 may not be the best place for dealing with specific
infrastructure projects.
Connectivity – expanding transportation networks, energy
routes and telecommunications infrastructure – has the potential
to improve the inclusion of different countries within the
global economy.
Sovereign governments’ budgetary positions should be divided
into two distinct parts: an operations account and a capital
account. The assets and liabilities of current and future
infrastructure projects would be reported in the capital account.
The issuance of infrastructure bonds (a liability in the capital
account) would finance individual infrastructure projects (an
asset in the capital account).
The issuance of infrastructure bonds that are directly linked
to each project would create a mechanism by which market
discipline is forced upon each infrastructure project, due to the
signal sent by the indicative pricing of each series of bonds.
Infrastructure bonds could be issued directly by governments
or by dedicated infrastructure financing authorities set up for
this purpose.
The G20 should translate the G20/OECD High-level Principles
of Long-term Investment Financing by Institutional Investors
into action through promoting the exchange of experiences, best
practices and lessons so that countries can find tailored solutions
for their circumstances.
The G20’s work on promoting sound and efficient financial
markets should pay more attention to the challenges facing
emerging markets.

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An international infrastructure forum should be organised to
bring together policy-makers, financiers (particularly pension
funds and fund managers) and implementers (project sponsors,
PPP centres and advisors) to discuss respective needs and
requirements regarding long-term infrastructure financing.
The G20 should draw on the experiences of the ASEAN
Infrastructure Fund (AIF) in the quest to advance
infrastructure investment.
The development of the regional bond market in Asia, including
the ASEAN+3 Asian Bond Markets Initiative, could support the
reduction of global imbalances by recycling Asia’s excess saving
within the region, through more investment in the region.
The G20 should highlight best practices in the area of local
currency bond markets such as the Asian Bond Fund 2 (ABF2),
and support dedicated information campaigns.
As a cross-cutting issue, the impact of other G20 initiatives
on the long-term investment financing environment should
be considered.
The G20, along with international organisations, should play
a role in the development, evaluation and prioritisation of
infrastructure projects.
The G20 should support the coordination of regional
development funds, including supporting the Africa50 Fund.
The development of a cross-border PPP framework would
help sovereign states cope with financing issues, and
increase harmonisation.

13
Session 4: Development
Challenges
Some of the descriptions of the G20 development agenda include
‘invertebrate, flabby and toothless’, ‘diffuse, lacking a coherent
narrative and disconnected from the central concerns of G20
leaders and finance ministers’, and ‘it is not always clear what
G20 is doing on the development front, what concrete steps and
decisions have been taken, what particular results it has helped
to achieve’.
Development ministers do not control the necessary policy
instruments: trade, infrastructure, agricultural development,
tax, policies on commodity and food price volatility, and anti-
corruption are all handled by other ministers.
Much remains to be done if the Millennium Development
Goals (MDGs) are to be met by 2015, and to shape the post-
2015 agenda. The imminent arrival of the 2015 deadline for
the MDGs provides an immediate need for Brisbane to produce
development initiatives that support this key priority.
The process currently underway for developing Post-
2015 Development Goals is likely to result in a valueless,
overloaded agenda.
The real problem with the performance of the G20 regarding
development is the lack of resource commitments. This leads
the G20 to task international organisations with conducting
research and coming up with policy recommendations on
various topics, without substantive follow-up action.
G20 members are reluctant to make resource commitments
to strengthen the role of the multilateral development
banks (MDBs).
The St Petersburg Accountability Report on G20 Development
Commitments does not take into account G20 members’
individual performances, and presents only the results of the

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implementation of the Seoul summit decisions, omitting those of
previous leaders’ meetings.
The UNFCCC negotiations in Paris in 2015 are intended to
produce a new Global Framework Agreement (GFA) on climate
change from 2020.
Climate change has been referenced at every G20 summit
since 2008, yet despite the fact that the biggest greenhouse
gas emitters are all members of the forum, the G20 has done
little, if anything, to help break the climate change stalemate in
the UNFCCC.
Development should be returned to the Framework and MAP,
including its accountability processes, to help inform a new G20
growth strategy and narrative.
The cross-cutting nature of development needs to be reflected
in the G20’s development agenda and policy approach. Joining
the Finance and Sherpa tracks may be conducive to achieving a
more consistent G20 development policy.
Joint meetings with the G20’s Finance and Development
Ministers may better integrate the financing aspect of
development policy.
On infrastructure, the G20 should focus on strengthening the
financial and technical role of the multilateral development
banks, as they can raise capital more cheaply and negotiate more
effectively with governments than private investors.
The G20 should prepare a narrative for the post-2015 agenda,
combining vision and principles, together with options for a few
concrete and time-bound commitments.
The G20 should assist in shaping content across the three
processes – UN-development, UN-environment, and UNFCCC
climate change – through a ‘G20 2015 Strategic Convergence

15
Group’, which would maintain an overview of key political
issues which cut across and connect these agendas.
Momentum on climate change negotiations needs to be built
through G20 leaders committing to attend the UNFCCC COP21
in Paris in 2015 and starting a conversation on how best to
mobilise the funding needed to finance climate change mitigation
and adaptation, including consideration of where the money
could be spent.
Leaders could be commissioned to prepare reports on specific
topics for discussion at the Brisbane summit, for example
food security, financial inclusion, infrastructure and domestic
resource mobilisation.
Development and trade should be better integrated in the
G20 agenda. The G20 should build on its previous commitments
to boost agricultural growth, with special attention to
smallholders, especially women and young farmers.
The G20 should implement their intention to assist developing
countries in capacity building in the area of tax administration.
The G20 should facilitate the production of an extended
‘Accountability Assessment for Impacts on Development and
Growth’ report. The report would identify all development
commitments from the St Petersburg summit, rank them for
likely development impact, and monitor implementation, starting
with the highest-ranking commitments. This monitoring would
be undertaken by independent experts.
Outreach activities, in particular with developing countries,
need to be leader-driven to ensure that the outreach process
is effective.
Note
1. Director, G20 Studies Centre, Lowy Institute for International Policy.

The G20 economic/
finance process

18
1
Sustainable growth and the stability of oil prices
– the Kingdom of Saudi Arabia’s objectives
Mustafa Alani1
Gulf Research Center
The Kingdom of Saudi Arabia’s importance within the Group of Twenty
(G20) lies in its being the world’s largest oil producer and exporter, and
the only OPEC member in the group. This gives it a rather special position.
Additionally, Saudi Arabia is the largest economy in the Middle East and
the only state from this vital region that is a member of the G20. Besides
which, the Kingdom holds the position of the leading state in the Arab
and Islamic world.
Unlike many other G20 members, it is only recently, as a result of
accumulated revenues from its significant oil exports, that international
financial markets have become relevant for Saudi Arabia. High oil prices
have added considerably to the Kingdom’s revenues, so much so that during
the past few years the Kingdom has smoothly transitioned from being a
net debtor to a creditor state. At the same time, the effects of globalisation
have brought the realisation that the Kingdom cannot be aloof from, or
remain unaffected by, economic and political developments in other parts
of the world. These developments outside the Kingdom’s borders have
an impact on the country’s policies, but are beyond its control. In the
interconnected world of today, the country’s financial system is inevitably
linked to the global financial markets and, therefore, is exposed to global

19
market forces. For these reasons, the Kingdom’s membership in the G20
was seen as important in securing stability for the Saudi economy and
contributing to the stability and development of the world economy.
In recent years, Saudi Arabia has been one of the best performing
economies in the G20. According to an International Monetary Fund (IMF)
report, the Kingdom, in the year 2012, topped the ranking in terms of
economic performance among the leading G20 nations and has played a
stabilising role in the global oil market. The IMF said the Saudi economy
grew by 5.1 per cent in 2012, benefitting from high oil prices and output,
which had led to large fiscal and current account surpluses and rising
international reserves. However, according to current forecasts, in 2013
the Kingdom’s growth could slow to 4 per cent.
At the same time, the Saudi economy has grown beyond oil and
is expanding and diversifying at a rapid rate. As part of its efforts to
incorporate G20 commitments, the Kingdom has embarked on reform
of its financial and banking system, promoting financial regulations
that reduce risks and could help to prevent future financial crises, and
modernising national financial architecture. The Global Competitiveness
Index of the World Economic Forum (WEF) now ranks Saudi Arabia as
the 20th most competitive economy in the world.2
The Kingdom’s leadership places emphasis on a ‘reasonable
oil price’
The Kingdom’s leadership is fully conscious of the responsibilities inherent
in being a superpower in the world oil market. They understand the direct
impact of high and volatile oil prices on world economic growth. The high
price of oil is not, of course, the only issue troubling the world economy
and hindering growth, but it constitutes one of the primary factors that
contribute to instability in the world economy. Thus, as a member of the
G20, facilitating healthy growth of the world economy constitutes the
cornerstone of Saudi Arabia’s oil policy.

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It has become a customary practice for Saudi policy-makers to indicate
from time to time the mark or a specific range for what they consider ‘a
reasonable or fair price’ for a barrel of crude oil. The Saudi practice is
not unusual, as oil prices have long been manipulated for specific policy
objectives. Price is a function of supply and demand. The responsibility
of Saudi Arabia, the world’s pre-eminent oil power and swing producer, is
to maintain the supply–demand balance. The role of swing producer has
given the Kingdom considerable influence in the oil market. In fact, oil
price stability and the maintenance of reasonable prices lie at the heart of
Saudi Arabia’s oil policy. The Kingdom’s leadership recognises that rising
crude prices could derail global economic recovery and lead the way to
steep decline, and that short-run gain from high oil prices may be offset
by reduced sales in the future.
Saudi Arabia produced 13.3 per cent of global oil in 2012, and at
present has an average production capacity of 10 million barrels per day.
With its presumed 2 million plus barrels per day of spare capacity (out
of a presumed 6 million barrels per day of OPEC total spare capacity),
it is determined to retain its role as the world’s swing producer and the
political and market influence that this confers.
Over the last two and a half decades, oil prices have fluctuated
considerably. These fluctuations have been more pronounced than at any
other time in history and consequently the definition of reasonable or fair
prices has also varied. In March 2013, Saudi Oil Minister Ali Al-Naimi
assured the world that his country’s concern is about maintaining global
economic growth, not about maintaining oil prices at any specific level,
and promised that Saudi Arabia will work hard to maintain ‘reasonable’ oil
prices. But he also clearly expressed his thoughts regarding the limitation
associated with such terminology as ‘reasonable or fair prices’, saying:
My first speech in Asia as minister was in Singapore in 1996. Oil
was just over $20 a barrel and I told the audience that the price,
at the time, seemed reasonable. Four years later, the price was

21
about $27, and was still seen as reasonable. Today, it’s up around
$100 and it seems reasonable.3
The Kingdom’s leadership also showed some concern about the effect of
high oil prices on future oil consumption and the possibility that high oil
prices could lead to ‘demand destruction’. This could, in turn, result in a
permanent shift on the demand curve in the direction of lower demand,
leaving the major oil-producing countries, especially Saudi Arabia, with
considerable ‘idle excess capacity’. Extremely low oil prices, on the other
hand, affect the growth potential of the producing countries and the flow
of investment to the industry, which would ultimately undermine oil supply
security, with detrimental impact on the interests of both producing and
consuming countries. Several officials of the Kingdom have argued that
$100 a barrel would be a ‘fair’ price for crude. Indeed, Saudi price targets,
which lie in a band around $100 per barrel, are not out of line with the
interests of many industrial countries.
The impact of rising oil prices on food prices is well-documented.
Saudi Arabia is gradually moving towards becoming a net food importer.
Given the unsustainable exploitation of the scarce water resources of the
Kingdom, the Saudi government recently decided to phase out local food
production.4
By 2020, food imports are expected to increase by 35 per
cent, according to a report issued by the Foodex Saudi Expo.5
In recent
years, Saudi Arabia has made various attempts to invest in food production
abroad and has launched the King Abdullah Initiative for Saudi Agriculture
Investment Abroad, with an investment fund of 3 billion Saudi riyals.
Thirty-five countries have been targeted for agro-investments,6
but this is
an exercise fraught with political sensitivity and the Kingdom has been
accused of embarking on a ‘neocolonial investment strategy’ targeting
the poor and developing countries. Volatility of oil and food commodity
markets does not serve the Kingdom’s national interests.
How oil prices might be managed in the long run is subject to several
challenges and to the impact of speculative forces that lie outside the reach
of the Kingdom’s influence, and even outside the global oil markets. Thus,

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the G20 could be the right venue to assist the Kingdom in influencing
medium- and long-term oil price expectations and in helping make these
markets less volatile.
Notes
1. Senior Advisor and Director of the Security and Defence Studies Department
at the Gulf Research Center (GRC), Kingdom of Saudi Arabia
2. See Jasim Ali,‘Saudi Arabia’s Economy Basks in Oil Price High’, Gulf News,
19 October 2013, http://gulfnews.com/business/markets/saudi-arabia-s-
economy-basks-in-oil-price-high-1.1244623.
3. Wael Mahdi,‘Naimi Says $100 Crude Oil Is Reasonable Price’, Bloomberg,
18 March 2013, www.bloomberg.com/news/2013-03-18/saudi-arabia-s-
naimi-says-100-crude-oil-is-reasonable-price.html; see also ‘Saudi Economic
Growth to Hit 4.7pc’, Al Bawaba Business, 11 April 2012, www.albawaba.
com/business/saudi-economic-growth-420624 and Tamsin Carlisle,‘Slower
Oil Price Rises Are in Saudi Interests’, The National, 27 January 2011, www.
thenational.ae/business/industry-insights/energy/slower-oil-price-rises-are-in-
saudi-interests.
4. Once a wheat exporter, Saudi Arabia is phasing out its wheat production
and will completely terminate it by 2016: see ‘GIEWS Country Briefs,
Saudi Arabia’, 23 August 2013, www.fao.org/giews/countrybrief/country.
jsp?code=SAU.
5. See ‘KSA’s Food Imports to Rise 35% by 2020,’ Arab News, 22 September
2013, www.arabnews.com/news/465464.
6. See ‘Saudi Arabia to Target Agro-investments Abroad,’ Arab News,
11 November 2013, www.arabnews.com/news/475651.

23
2
and the G20
Colin I. Bradford1
The Brookings Institution and the Centre for International
Governance Innovation
The current account and international investment position
A review of global imbalances suggests that a narrow focus on the current
account, driven by the savings-investment perspective, is increasingly
misguided under financial globalisation. Even if the savings-investment
gap is large, it can be sustained if the imbalance in the financial and capital
account is equally large in the opposite direction. As long as capital flows
are channelled into productive uses for which the return on investment
covers the opportunity cost of capital on a sustainable basis, a large current
account deficit by itself does not lead to a crisis. A capital-poor country
with good growth prospects provides a prime example where a current
account deficit actually represents a win-win situation for borrowers and
lenders alike. By contrast, even if the imbalance in the current account is
not large, a sudden change in capital flows may precipitate a crisis. For
example, even a country with solid growth fundamentals can get into
serious trouble if it does not have enough liquidity to deal with abrupt
capital outflows.

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Hence, an exclusive focus on achieving zero imbalances through
policies that affect the savings-investment gap is misguided. Instead, policy
prescriptions should also cover financial resource allocation and micro-
and macroprudential issues, as well as financial safety nets to deal with
capital flow reversals.
Before the advent of financial globalisation, the current account
balance could be employed as a measure of external sustainability, and a
separate set of capital and liquidity ratios could be used to assess financial
stability. With financial globalisation, however, the intersection between
external sustainability and financial stability has increased dramatically. As
domestic and foreign financial institutions are increasingly interconnected,
the question of external sustainability cannot be separated from that
of financial stability, which should take into account the currency and
maturity mismatches of leveraged economic agents and their exposures to
risk relative to their capital buffers. It cannot be ascertained by looking at
the savings-investment gap alone. In practice, this means that, in addition
to the current account balance, some measures of reserve-currency liquidity
(for example, foreign exchange reserves relative to short-term foreign
debt) and soundness of investment (for example, credit growth, loan-to-
deposit ratio, nonperforming loans ratio, interest coverage ratio) should
be employed2
in assessing the external sustainability of the country as a
whole and its systemically important financial institutions.
G20 global rebalancing and assessing systemic risk
At the time that the framework of strong, sustainable and balanced
growth (FSSBG) was launched, in September 2009 at the Pittsburg G20
summit, it was genuinely felt that the concentration of global imbalances
in the United States deficits and the Chinese surpluses was potentially
destabilising, unhelpful for other countries, and a threat to global stability.
At that time, the focus on ‘rebalancing’ real economy deficits and surpluses,
internal and external, was justified. One could successfully argue that these

25
Global rebalancing
imbalances still matter. But one way to understand the origins of the FSSBG
against this background is that there was a sense of the vulnerability of
the global economy to the continuation of these imbalances, and even to
their correction. The focus then on global real economy imbalances was
fundamentally a focus on systemic risk.
As shown above, those imbalances have attenuated somewhat. Now
that the euro crisis has occurred and the potential for financial risk not
only continues but possibly has increased with the use of unconventional
monetary policies, it would seem that an FSSBG focus on systemic risk
would now have to include a focus on threats to financial instability,
large and small. Recall that bank runs in Cyprus had global implications.
Integrating financial risk assessment into the G20 Mutual Assessment
Process (MAP) would seem consistent with the original focus of the MAP
on systemic risk.
Furthermore, the FSSBG would be the appropriate locus for focusing
policy-makers’ attention on the explicit ways in which financial stability
can contribute to growth. The traditional way of viewing financial stability
and growth was to see them as trade-offs. Even today, a major concern
advanced by some is that financial regulation could dampen growth rather
than facilitate it. But, as Mike Callaghan has pointed out, ‘the [October
2012] GFSR [Global Financial Stability Report] posed a fundamental
question … whether the structural changes occurring in the financial system
are not only making it safer but are doing so in a way that is promoting
better economic outcomes.’3
The October 2012 GFSR puts it this way: ‘The global regulatory reform
agenda aims for a safer financial system so that financial intermediation
can help produce stable and sustainable economic growth.’4
From this
perspective, including financial stability in the FSSBG would help highlight
these linkages to growth and enhance them.
Therefore, it would seem wise to consider refocusing the FSSBG by
integrating the analysis of financial imbalances with real economy policy
divergences, in order to better understand potential threats to the global
economy – as was the original intent of the MAP – while at the same time

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26
enlarging the focus on the contributions that financial stability can make
to economic growth. Financial stability could be viewed as vital to the
‘sustainable’ element of the FSSBG.
The capital account also matters; the MAP, and the real economy
rebalancing that is the primary goal of it, focuses primarily on the current
account. Integrating the analysis of capital flows through the capital
account, identifying gross capital flows and their balance sheet effects,
would provide a window into financial sector variables that might operate
independently of, but impact on, the real economy variables reflected in
the current account.
Maurice Obstfeld, in an extensive and nuanced analysis, has made
these points extremely clear. While not putting aside a focus on the current
account, Obstfeld writes, in conclusion:
The same factors that dictate careful attention to global imbalances
also imply that data on gross international financial flows and
positions are central to any assessment of financial stability risks.
The balance sheet mismatches of leveraged entities provide the
most direct indicators of potential instability, much more so than
global imbalances … A minimally effective financial ‘architecture’
would … imply a higher level of global economic government
than currently exists. The political obstacles are daunting. But
in light of the recent financial turmoil, one must ask how far
we can safely push globalized markets beyond the perimeter of
globalized governance.5
Furthermore, such a refocus could respond to one of the most important
conclusions of the IMF’s Independent Evaluation Office’s report on lessons
learned from the current crisis, which is ‘to better integrate financial sector
issues into macroeconomic assessments’.6
The IEO starkly concluded that
‘the IMF [in the run-up to this crisis] appropriately stressed the urgency
of addressing the persistent and growing current account imbalances, but

27
Global rebalancing
it did not look at how these imbalances were linked to the systemic risks
that were building up in financial systems.’7
The three dimensions of systemic risk assessment
At this point, it is useful to clarify three different dimensions of systemic
risk assessment. First, real economy imbalances, if not addressed, can
become unsustainable and generate their own global economic disruptions.
Second, financial sector analyses to assess domestic and global sources of
systemic financial risk, in the aftermath of the financial crisis of 2007–
08, are the new imperative for managing the global economy. And third,
financial regulatory reform to provide new institutional capacity, new
sources of data and new policy instruments (for example, macroprudential
policies) for exercising oversight, supervision and regulation of financial
markets and institutions is the cutting edge of institutional innovation
with regards to managing the global economy.
The G20 MAP, as of now, is designed to address only the real economy
imbalances; the IMF, with support from the FSB, has the lead in evaluating
global financial risk and providing an early warning system for signalling
vulnerabilities; and the FSB has the lead in financial regulatory reform
efforts by major economies.
The G20 Working Group on the Framework for Strong, Sustainable and
Balanced Growth reports regularly to G20 summits on global rebalancing;
the IMF conveys the contents of its various assessments of financial risk to
the IMF Board of Executive Directors, the IMF Board of Governors of 188
IMF member countries and the IMF ministerial-level International Monetary
and Finance Committee (IMFC), composed of fifteen G20 members and nine
other IMF member countries; and the FSB reports regularly on progress in
financial regulatory reform to G20 leaders-level summits.
What this means is that even though fifteen G20 countries are
represented at the IMFC, the G20 does not itself serve as a channel for
IMF financial sector analyses, nor as a policy-level group responsible for

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reviewing systemic risk vulnerabilities. These analyses are done by the
IMF for IMF governing bodies. Except for describing assessment processes
underway, IMF documents prepared for the G20 do not generally analyse
systemic financial risk.
With IMF work on global rebalancing and the FSB’s regulatory reform
reports both going to the G20, but with the financial risk assessment work
being contained largely within IMF structures and governing bodies, there
is not an institutional setting for high-level policy-makers to make a fully
integrated evaluation of these three elements taken together, to ascertain
systemic risk. In a global economy in need of steerage, this disjointed
arrangement could create voids in the perception of risk, and questions
about who is in charge of the global economy.8
Notes
1. Nonresident Senior Fellow of The Brookings Institution and of the Centre
for International Governance Innovation (CIGI)
2. ‘The Capital-Freeze Index’, The Economist, 9 September 2013.
3. Mike Callaghan, ‘Financial Regulation and the G20: is there a gap in the
governance structure?’, paper presented to the Asia Regional THINK20
Seminar, Sydney, , 22–24 May 2013.
4. IMF,‘Global Financial Stability Report: restoring confidence and progressing
on reforms’, chapter 3, October 2012.
5. Maurice Obstfeld, ‘Does the Current Account Still Matter?’, American
Economic Review: Papers and Proceedings, 2012, 102(3), pp. 19–20.
6. IEO,‘IMF Performance in the Run-up to the Financial and Economic Crisis:
IMF surveillance in 2004-2007’, 2011.
7. Ibid, p. 7.
8. Source for this paper: Colin I. Bradford and Wonhyuk Lim, ‘Global
Rebalancing, Systemic Risk Assessment and the IMF and the G20’, The G20
at Five (Brookings–Australian National University Roundtable, Canberra,
14 November 2013).

29
3
The Brisbane Summit needs to deliver a G20
coordinated growth strategy
Mike Callaghan1
Lowy Institute for International Policy
At the Pittsburgh G20 summit, leaders said: ‘Today we agreed to launch
a framework that lays out the policies and the way we act together to
generate strong, sustainable and balanced growth. We need a durable
recovery that creates the good jobs our people need’.2
The world is still
waiting for the durable recovery.
Five years after the crisis, the IMF commenced its October 2013
World Economic Outlook by stating ‘Global growth is still weak, its
underlying dynamics are changing, and the risks to the forecasts remain
to the downside. As a result, new policy challenges are arising and policy
spillovers may pose greater concern.’3
Global growth remains below potential. It averaged only 2½ per cent
during the first half of 2013 – about the same pace as the second half of
2012. In the years prior to the crisis, world growth averaged 4 per cent
per year. Unemployment is high, particularly among the young, public debt
is at worrying levels, financial fragmentation is growing, monetary policy
is in uncharted waters and capital flows are volatile. There is also reason
to be concerned about the sustainability of current growth rates, given
the slowdown in emerging economies and the vulnerabilities confronting
many economies. In addition, inequality is growing within most countries.

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Notwithstanding the action plans released at each successive summit,
the G20 has failed to deliver on its basic commitment to restore strong
and sustainable balanced growth.
Moreover, the G20 has struggled to deliver a clear, consistent and
coordinated message as to how members are cooperating to restore growth
and create jobs. It has not lived up to the high ideals of the Framework. The
focus has been more on areas of disagreement than on those of agreement,
as illustrated by the debate over ‘growth versus austerity’, or the concerns
many members have regarding the use of quantitative easing by some
major developed economies, with resulting concerns over ‘currency wars’.
As Pierre Siklos has observed, ‘the G20 has given the appearance of not
being able to convincingly sing from the same song sheet.’4
The leaders’ declaration and action plan released at the St Petersburg
summit acknowledged the risks to the global economy. Leaders said that
‘despite our actions, the recovery is too weak, and risks remain tilted to
the downside.’ They went on to state: ‘To address these challenges and to
place the global economy on a stronger, more sustainable and balanced
growth path, we have built on our previous actions with new measures
set out in the St Petersburg Action Plan.’ But the ‘action’ consisted largely
of a listing of policies already announced, or already being implemented
by members.5
There was little mention of the need to cooperate, and little
evidence that G20 countries have a coherent strategy and are actually
cooperating in their policy settings, recognising that by acting together they
can achieve outcomes that exceed those they can achieve by acting alone.
G20 members have to get back on the same page and demonstrate that
the G20 truly is an effective forum for dealing with international economic
issues and fostering cooperation. In particular, the G20 must develop a
clearer, more consistent narrative about how members are cooperating
to strengthen global economic growth and create jobs. But it also needs
to acknowledge more clearly the challenges confronting policy-makers.
Olivier Blanchard has emphasised that the crisis has required a rethinking
of macroeconomic policy.6
This is perhaps no more evident than in the use
of unconventional monetary policy by a number of advanced economies.

31
G20 coordinated growth strategy
The world is in the midst of an economic experiment at a time when, in the
words of the IMF Managing Director, it is ‘hyperconnected’. All countries
are impacted and cooperation is vital.The G20 has to go beyond rhetoric. It
must demonstrate that it is backing its words about cooperation with deeds.
In the St. Petersburg declaration, leaders requested their finance ministers
to ‘develop further comprehensive growth strategies for presentation to
the Brisbane summit’. This should be a top priority for the G20 in 2014,
with the addition that the focus should be on developing ‘coordinated’
growth strategies. It is an opportunity to place the Framework for Strong,
Sustainable and Balanced Growth at the centre of the G20 activities and
demonstrate that all of the G20’s work is part of the growth strategy. The
G20’s activities cannot be considered in silos. Steps should be taken to
revitalise both the Mutual Assessment Process and the action plans that
are released after each summit. As noted, these plans have hitherto been
a list of already announced commitments by countries, and receive little
attention. The question has to be asked whether these action plans are
influencing the policies of G20 members. The concept of countries listing
specific policy measures in their action plans and the idea of some form
of peer review was well-intentioned, but is it working? Is the approach
too detailed, even taking into account the latest request for members to
identify their top three structural reform measures? Should countries be
focusing more on their overall growth strategy, including in particular
identification of spillovers? It is important that the action plans reflect
how countries are cooperating.
The development of a G20 coordinated growth strategy for the Brisbane
summit should not be left to officials. It should not be just another
attachment to a voluminous set of supporting documentation released at
the Brisbane summit. Finance ministers and central bank governors must
be directly involved, and it should be a key component of the leaders’
summit in November 2014.
The preparation of a G20 coordinated growth strategy is an opportunity
to refocus the meetings of finance ministers and central bank governors.
These meetings should not be excessively procedural or burdened with a

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fixed agenda. Finance ministers and governors must be responsive to the
challenges that can quickly arise in a volatile global economy, but they
must also be focused on the longer-term policy measures needed to restore
growth. The challenge confronting ministers and governors in 2014 will
continue to be dealing with weak global demand at a time when the limits
of accommodative fiscal and monetary policies have largely been reached.
Ministers and governors will have to prepare and communicate in 2014 an
economic policy mix that provides for the orderly consolidation of fiscal
positions, the gradual exit from the various extraordinary monetary policy
settings and the capacity to deal with potentially very volatile capital flows,
along with measures to boost private demand.
Critical to boosting private demand will be an accelerated program
of structural reforms. While the importance of more decisive action on
structural reforms was recognised at St Petersburg, one of the constraints
of the current G20 arrangements is that most finance ministers do not have
responsibility in their jurisdictions for the required structural measures.
Attempts to deal with this have included one-off joint G20 meetings, such
as the meeting of G20 finance ministers and labour ministers in 2013,
or separate one-off meetings of G20 ministers of labour or trade, for
example. An initiative that should be introduced in 2014 is to open up
the finance ministers’ process so that other ministers directly responsible
for the structural reforms being considered can attend on an ‘as needed’
basis. Which ministers should go to a meeting would depend on the topics
being discussed and the domestic division of responsibilities. Each country
would have two seats at the table at each meeting, but who occupied the
seats would depend on the topic being discussed.
With respect to the finance stream in 2014, there should be a focus
on improving the oversight of international efforts to strengthen financial
regulation. This is meant to be a core priority of the forum, but the G20
has largely become a rubber stamp for the technical work of the Financial
Stability Board. The issue of financial regulation requires more dedicated
ministerial oversight than it is currently receiving, as the finance sector
will be the source of future crises, just as it has been in the past. The

33
G20 coordinated growth strategy
G20 should not be caught up in the details of financial regulation, but
should focus on the bigger picture, such as assessing overall progress on
achieving a stable and efficient financial sector that meets the needs of
the real economy. One way that this could be achieved would be for the
G20 finance ministers’ meetings that take place at the time of the spring
meetings of the IMF to focus on financial regulation. This would help
remove the current duplication associated with back-to-back meetings of
G20 finance ministers and the IMF’s International Monetary and Finance
Committee (IMFC). These meetings currently have similar agendas and
there is an overlap of members.
Notes
1. Director, G20 Studies Centre. Lowy Institute for International Policy
2. G20, Leaders’ Statement: The Pittsburgh Summit (25 September 2009),
www.g20.utoronto.ca/2009/2009communique0925.html.
3. IMF, World Economic Outlook (Washington, DC: IMF, October 2013),
www.imf.org/external/pubs/ft/weo/2013/02/.
4. Pierre Siklos, ‘The Great Fragmentation: The Makings of Another Crisis
or Opportunity for Progress?’ (CIGI, 24 July 2013), www.cigionline.org/
publications/2013/7/great-fragmentation-makings-of-another-crisis-or-
opportunity-progress.
5. G20, St. Petersburg Action Plan (6 September 2013), www.g20.utoronto.
ca/2013/2013-0906-plan.html.
6. Olivier Blanchard, ‘Rethinking Macro Policy II: First Steps and Early
Lessons’ (Washington, DC: IMF, April 2013), www.imf.org/external/np/
seminars/eng/2013/macro2/.

34
4
the G20 leaders’ agenda
Mike Callaghan1
Lowy Institute for International Policy
The G20 leaders’ process should involve learning from the experiences of
the past, dealing with the demands of today and anticipating the challenges
of the future. If the G20 is to be the premier forum for international
economic cooperation, it needs to focus more on likely future developments
and the challenges from a rapidly changing global marketplace.
One lesson from the crisis is the close interconnectedness between
financial markets. As Janet Yellen has pointed out in reflecting on the events
of 2008, losses arising from leveraged investments caused a few important,
but perhaps not essential, financial institutions to fail.2
She goes on to note,
‘At first, the damage appeared to be contained, but the resulting stresses
revealed extensive interconnections among traditional banks, investment
houses, and the rapidly growing and less regulated shadow banking sector.’
Of course, that interconnectedness operated globally and the events in US
financial markets had worldwide ramifications.
Tax and trade are two high-profile issues on the G20 agenda. Like
finance, they have a common driver: namely, the challenge policy faces
in keeping up with an increasingly global and interconnected business
landscape. More and more businesses operate globally.

35
G20 leaders’ agenda
Trade policy has to adapt to the reality that value chains are increasingly
driving international trade. Goods are ‘made in the world’ rather than in
one country. In such a world, the mercantilist view that exports are good
and imports are bad, and the traditional trade negotiating stance that
market access can only be granted as a concession for access to another
country’s market, are out of date and counterproductive.
A challenge facing the G20 on tax is dealing with ‘base erosion and
profit shifting’ – the ability of globally operating companies to exploit
loopholes, particularly in double tax agreements, to make profits disappear
for tax purposes, or shift profits to jurisdictions with little or no taxation.
The rise of global value chains has been facilitated by technological
developments, particularly the digital age. The same forces have been
driving financial innovation and the interconnectedness of financial markets,
along with transforming the traditional approach to corporate taxation.
Goods are no longer produced in a single location in a single country,
but are widely dispersed across jurisdictions. In such an environment it
is increasingly difficult to determine in which jurisdiction value-adding
occurs and where tax can be applied. This is even more challenging with
goods and services delivered over the internet, including the challenge of
imposing value-added taxes on such cross-border transactions.
Moreover, multinational companies do not organise their operations as
discrete entities in specific countries who engage in arm’s-length transactions
– they adopt a global approach. In such a world it is very difficult for
a jurisdiction to identify where its taxing rights exist, and very easy for
corporations to ensure that profits are only declared in low-tax centres.
Technological change will not stop. Financial innovation will not stop.
More and more goods and services will be delivered over the internet. The
advent of the 3D printer will further diffuse production and value-adding
activities across many jurisdictions.
These developments will further increase integration between countries.
The result will be that individual nation states will find it increasingly
difficult to set laws covering globally operating businesses. Effective
international cooperation will become more and more important. This

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is, of course, the reason for the existence of the G20, and it emphasises
the necessity of ensuring that there are effective forums for international
economic cooperation.
So rather than looking at such issues as financial regulation, trade and
tax as discrete issues, the agenda for the Brisbane G20 Summit should
incorporate a specific session where leaders reflect on the future challenges
of economic management from the perspective of likely corporate and
technological developments. In short, G20 leaders should engage in ‘the
vision thing’.
Notes
1. Director, G20 Studies Centre, Lowy Institute for International Policy.
2. Janet L. Yellen, ‘Interconnectedness and Systemic Risk: Lessons from the
Financial Crisis and Policy Implications’ (speech, San Diego, 4 January
2013), www.federalreserve.gov/newsevents/speech/yellen20130104a.htm.

37
5
Post-growth societies for the 21st
century
Lucas Chancel1
Institute for Sustainable Development and International Relations
Background: an inaudible discourse on growth
Since the 1970s, growth rates in the wealthiest European countries have
been sluggish, if not in decline, and Europe is not the only region affected.
For the generations born after the 1970s, in the wake of the thirty-year
post-war boom, the political discourse on the return to growth is becoming
increasingly outdated.
Some leaders are hoping for a return to the thriving post-war decades
or the onset of a new industrial revolution, while others would be quite
content with an annual 2 per cent growth rate once the crisis has passed.2
Moreover, for the vast majority of politicians, growth is synonymous
with prosperity: more growth is needed to create more jobs, reduce
inequalities, maintain the quality of the welfare states and, ultimately,
make people happy.
These political discourses on growth are thus doubly dissatisfying.
Unfortunately, authors who are developing alternative ways of thinking
about growth fail to address this dissatisfaction. First, because the
demonstration that the end of economic growth is inevitable given the
finite nature of the world seems to us far from robust, just like the hopes

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38
for a new wave of growth buoyed up by green technologies. Second, the
literature on growth indicators that could replace GDP indeed addresses
the paramount social and environmental objectives, but often says too
little about the role played by GDP growth in reaching these objectives,
whether in the area of employment or income equality or access to essential
services such as healthcare and education.
To respond to this dissatisfaction with the political and media discourse
on growth, the IDDRI report entitled ‘A Post-Growth Society for the XXIst
century’ attempts to answer, as far as possible, the two following questions:
1. Can we have any certainty about the future of growth?
2. Assuming that the coming decades will be a period of weak
growth, fluctuating between an annual 1 per cent growth and a
stagnant GDP, can we still prosper?
To answer these questions, we have studied the economic literature,
organised seminars bringing together practitioners, policy-makers and
experts, and carried out a modelling exercise to investigate the links
between the energy–climate nexus and the economy.
Is there a future for economic growth in the developed world?
Growth rates exceeding 1 per cent a year are a recent phenomenon in
the history of humanity and those seen in the post–World War II years in
Europe are something of an exception. Growth is the result of complex
mechanisms that can be linked up with factors such as the composition
of the economy (tertiarisation), the diffusion of new technologies with a
strong transformative potential, energy and the nature of a state’s social
compromise. However, economists are clearly quite unable to establish
robust forecasts covering several decades.
Economic growth has been declining for the last forty years in the
rich countries, and a weak-growth situation could well persist, or even

39
century
worsen. In fact, it is not inconceivable that today’s new technologies may
prove to be less radical than those that drove the industrial revolution, or
that the tertiarisation of the economy underway in industrial countries is
resulting in slower productivity gains, particularly in those countries that
have opted for development models based on education, healthcare, caring
for the elderly and, more generally, on ‘personal’ services.
On top of this, there are challenges involving energy resource scarcity
and global greenhouse gas emissions. Here, too, we find a great deal of
controversy. While some consider economic ‘degrowth’ to be inevitable,
others believe that these environmental challenges present a fantastic
opportunity to return to growth and start a new industrial revolution.
As we have seen, the current state of natural resources is sometimes
worrisome. Yet, to understand the possible macroeconomic impact of
energy resource scarcity or emission reduction, it is necessary to call on
an economy–energy–climate model such as the CIRED (International
Conference on Electricity Distribution) model used by IDDRI. Our findings
show that while the most pessimistic scenarios are confirmed (for energy
resources, trends in the cost of low-carbon technologies and lifestyles),
the macroeconomic impact may be several tenths of a percentage point
of annual growth and may be even stronger during the transition period,
spanning the next twenty years. Moreover, if growth is already weak, this
represents a substantial drop.
There is thus ‘radical’ uncertainty about the future of economic growth.
Our future policy choices and the technologies that we invent in the coming
years are uncertain. This opens up a large range of possible economic
pathways, with an equivalent number of growth outcomes. And the
eventuality of low growth rates – floundering around 1 per cent, stagnation
or worse – is not to be excluded.

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Can we prosper without growth?
In political discourses, growth and prosperity are often synonymous. Yet
it would appear from this report that adapting to very low growth rates
does not mean abandoning the objectives pursued by public authorities
to reduce inequalities in wealth, social protection and life satisfaction.
The links between growth and prosperity are much weaker than is
generally imagined. There is, in fact, no correlation between happiness
and long-term growth in the richest countries, any more than between
employment and long-term growth. Employment and growth appear to
be strongly correlated in the short term, but many economists contend
that it is not so much growth that drives employment as employment
that helps restore growth; that there is no need for growth in order to
create employment, but rather a tautological need for ‘employment policies’
(labour market, industrial strategy, wage policy, public-sector employment,
etc.). Likewise, although happiness and growth are strongly correlated in
the short term, this is primarily due to employment: what people need to
feel happy is not so much growth as jobs. In political discourse, the detour
via growth is very often unnecessary.
On the other hand, the links between growth, long-term inequality
and social protection are much more tenuous. Weaker growth deepens
income inequality over the long term, but equality seems to be crucial for
self-reported happiness and the efficiency of healthcare systems. A low-
growth society thus needs to redouble its efforts as far as redistribution
is concerned.
Similarly, we observe that weak growth complicates decisions on
the trade-offs required to secure the financing of pay-as-you-go pension
systems: without growth, there is more reason to step up contributions
and/or work longer and/or decrease pensions relatively. The same holds for
the health sector: with rising demand for health in a low-growth context,
the need arises to increase contributions and/or cut expenditures and/or
radically reform the system. Ultimately, without a ‘bubble of oxygen’ from
growth, we need more reforms, more political action.

41
century
Unfortunately, a weak-growth context puts a powerful brake on policy,
whether the goal is to reduce inequalities or reform the social protection
system. Since the pie is not growing as fast as it used to, it is more difficult
to modify the distribution of wealth between workers and rentiers, active
and inactive workers, or arbitrate collectively between public and private
health services. A weaker growth regime thus imposes more arbitrations
and renders them even more politically sensitive.
By way of conclusion, a brief reminder of what we have outlined above:
the analysis shows it is not so much society’s economic growth that matters,
but rather the individual and collective choices that we make: whether
or not to adopt a development model based on ‘personal’ services, or to
achieve our climate objectives. These choices will lead to different levels
of prosperity and economic growth. The level and growth rate of GDP are
above all the outcome of our choices of development paths, and do not
determine the prosperity of the industrialised countries. This conclusion
may appear trivial to some, but it is nonetheless fundamental. The ‘detour’
via GDP growth to reach the destination of prosperity, which is operative
in many political discourses, seems in many respects pointless and – after
decades of weak growth – outdated.
It is now time for policy-makers to take a fresh look at growth, accept
the radical uncertainty surrounding its future, and construct, first of all,
a positive narrative for the future with no reference to growth and, then,
a society that is able to concretely free itself of the shackles of growth:
a post-growth society. We hope that we have given them some food for
thought, so that policy makers will make themselves heard once again by
the generations born after the post-war boom. We also hope that we have
been able to encourage researchers to deepen the questions that have been
left open – post-growth macroeconomics still remains to be built.

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Notes
1. Research Fellow Growth and Prosperity, Institute for Sustainable
Development and International Relations (IDDRI).
2. Do policies have an optimistic leaning as far as growth is concerned? We
consider that this is often the case for medium-term and long-term growth,
as evidenced by the hopes for a new wave of growth, and also for short-
term growth (take, for example, the French Government’s growth forecasts
over the last ten years, which have overestimated the growth rate for each
following year by nearly one percentage point – which is to say, by as much
as the average growth rate over the same period). Obviously, in the short
term, we have the example of the public deficits that have worsened in recent
decades. But is overestimating long-term growth of grave concern? The
answer is no – as long as today’s policy actions do not make it imperative
to achieve high growth rates.

43
6
Strengthening the peer review of the G20
Mutual Assessment Process
Katharina Gnath and Claudia Schmucker1
Stiftung neue Verantwortung and the German Council on
Foreign Relations
As the global upturn continues to bear risks, the issue of economic growth
is still a central element of the G20 agenda. The item is connected to
macroeconomic imbalances, which rose dramatically before the financial
crisis and which are considered a major risk to the stability of the global
economic and financial system. As a consequence, the G20 adopted the
Framework for Strong, Sustainable and Balanced Growth in 2009, with the
objective of reducing macroeconomic imbalances and promoting sustainable
growth. In the context of the Framework, the Mutual Assessment Process
(MAP) was established to analyse national economic policies and their
spillover effects on other countries and on global growth, with the goal
of formulating individual adjustment commitments. Since then, the issue
has been addressed by the G20 at the highest political level; the success
of the Framework and the MAP are closely connected to the success of
the G20 as a whole.
Apart from independent and transparent analytical input that helps to
identify the imbalances and distortions correctly and in a timely manner,
our previous research2
identifies two key criteria that are essential for
governing the G20 surveillance process, MAP, successfully. First, a high

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44
level of ownership when formulating the targets and reform measures
increases political will to commit to a meaningful international surveillance
procedure. Second, an effective monitoring and enforcement system helps
to maintain commitment and avoid a return to non-cooperative behaviour.
In the spirit of the MAP being a country-led surveillance process, we
recommend that the Australian G20 presidency focus on strengthening the
peer review capacity of MAP by way of the following four measures: It
should (1) ensure specific and timely commitments of the individual G20
members, with a clear focus on spillovers; (2) expand candid discussions
based on an ‘explain and justify’ approach to Article 4–type consultations
at the G20; (3) introduce clear timetables and a bilateral monitoring
process; and (4) streamline the publication of final MAP results into one
coherent G20 document.
Improving the peer process of formulating MAP commitments
Compared to the IMF’s surveillance procedure (so-called Article 4
consultations), MAP is very strong on ownership, as the entire process
is led and directed by the G20 member states. The basic work of MAP
surveillance is done in the Framework Working Group (FWG), which
meets several times a year and consists of mid- to high-ranking officials
from finance ministries and central banks of the G20 countries. In the
meetings, countries usually present their national reform plans, and this is
followed by open and candid discussion. The final decisions on Framework
commitments are taken by consensus.
These regular exchanges at which representatives from all G20 member
states talk openly about their economic policy plans and the international
consistency thereof are one of the key added values of the G20 MAP
surveillance. Through such regular and candid discussions behind closed
doors, trust and understanding can develop among sometimes very different
member countries – different both in their level of economic development
and their approaches to economic policy-making. The informal and

45
G20 Mutual Assessment Process
member-driven character of the FWG facilitates the development of
common basic understandings, but also sheds light on the views and
political constraints of individual states, as a first step toward international
cooperation and long-term international policy adjustment.3
Examples of
such gradual policy rapprochement in the context of the MAP are China’s
gradual changes in its exchange rate policy, and Japan’s VAT increase. Yet
this process of formulating individual commitments can be improved.
Recommendation 1
The commitments that are presented by the individual countries must be
timely and up to date to form a real basis for discussion. In the context of
the 2012 Los Cabos Accountability Assessment Framework (AAF), it was
decided that policy commitments should be ‘concrete, using quantitative
measures where possible to help focus the discussion and assess progress’.4
The Australian presidency should encourage member states even more
explicitly to propose MAP commitments that are as specific as possible
in nature and that spell out the potential international spillover effects
more clearly.
Recommendation 2
The discussions on adjustment expectations and deliverables in the context
of the surveillance exercise should be frank, specific and issue-driven. The
Australian presidency should reinforce the‘explain and justify’ approach for
discussing individual commitments in the FWG: countries should explain
their suggested reform plans with regard to the anticipated spillovers and
effects on global growth. Moreover, member states should stand ready to
take comments and criticism from their peers and take account of what
kind of deliverables are expected. Explaining and justifying takes place
before the final commitments are announced at the yearly G20 summits
of the heads of state and governments. For the first time in 2013, each
member state was assigned to assess the economic policy plans of another
G20 country in the FWG, taking IMF and World Bank reports into
consideration. For example, Brazil analysed the German commitments,

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while Germany reviewed China’s proposals. This is a step in the right
direction. In order to make this bilateral assessment a worthwhile exercise,
it should be ensured that there is enough room for discussion of individual
countries in the future. The Australian presidency should continue and
enhance the bilateral peer review in the FWG so as to develop it into an
Article 4–type consultation at the G20 – yet one among peers, and on a
more informal and flexible basis than at the IMF.
Strengthening the monitoring mechanism for implementing
MAP commitments
In contrast to international organisations, the G20 is an informal forum.
Because of this, a formal mechanism was not established to monitor and
enforce national commitments made in the context of the MAP. It was
only under the 2012 Mexican presidency that the G20 started to tackle
the issue of non-compliance. In the AAF, the G20 agreed on principles to
guide the monitoring and enforcement of its decisions in the future.
The MAP approach to monitoring and enforcement can be described
as ‘trust but verify’: the process does not involve any sanctions. Pressure
to fulfil the MAP objectives and to change policies is indirect and exerted
through a mix of self-assessment, peer review and assessment through
international organisations like the IMF. Yet in spite of recent efforts at
Los Cabos to enhance monitoring and enforcement of implementation of
MAP commitments, the process could be improved through a strengthening
of the peer review element of the process.
We acknowledge that peer review bears the inherent danger that the
participating countries are the accused, judge and jury at once, which
threatens the implementation of politically painful policy adjustments.
However, if monitoring mechanisms were equipped with more ‘teeth’, or
enforcement was conducted through an outside actor, there would be a
dramatic decrease in ownership of the MAP – and thus in the political will to
commit to a meaningful international surveillance initiative in the first place.

G20 Mutual Assessment Process
47
Recommendation 3
In order to enhance the review capacity of the peers, there must be a clear
timetable for the review process. It should follow a yearly cycle, with
the presentation of policy commitments at each summit meeting as the
starting/end point of the annual review process. National commitments
should cover the range of short-, medium-, and long-term goals, and they
should all have a clear timetable for implementation and a road map to
achieve them that can be easily verified by the peers. In this context, it could
be useful for the Australian presidency to expand the process of pairing
countries, not only for the formulation stage but also for the monitoring
stage of MAP surveillance. Each country would then be responsible not
only for assessing the proposed commitments of another member, but
also for reviewing the implementation of the policy plans of its partner
country in the FWG.
Recommendation 4
The Australian presidency should work towards streamlining the publication
of the MAP results. In addition to the individual commitments listed in
the action plans, the framework commitments feature in the leaders’ and
ministers’ declarations as well as in other G20 work streams – all of which
have their own public documents and reports. To improve the visibility
and accountability of the MAP commitments it is necessary to put all
issues connected to the Framework and MAP together into one single
document. This would improve transparency, as the commitments could
then be more easily assessed, compared and verified, by both G20 member
states and external actors. Moreover, streamlining the documentation of
the MAP results would help to focus the activities of the G20 and counter
the problem of ‘agenda creep’.
G20 surveillance in the context of the MAP is informal and peer-driven
– and consciously so. It is therefore outside of the Australian presidency’s
remit to force member states to commit to national rebalancing and growth
measures that are domestically unpopular or unfeasible. Nor is the G20
presidency in a position to make member states agree on a common

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48
vision for the global economy, when in fact they diverge in outlook and
economic philosophy. However, during its 2014 presidency, the Australian
government can work towards improving the governance of the MAP
surveillance by strengthening the discussion, formulation and monitoring
of national rebalancing and growth commitments in a peer-review process.
Notes
1. Katharina Gnath, Fellow, Stiftung Neue Verantwortung, Berliner Freiheit
2, 10785 Berlin, Germany, email: kgnath@stiftung-nv.de (correspondence
author); Dr Claudia Schmucker, Head of Globalization and World Economy
Program, German Council on Foreign Relations (DGAP), Rauchstraße
17/18, 10787 Berlin, Germany, email: schmucker@dgap.org. This policy
contribution represents the personal views of the authors.
2. Katharina Gnath and Claudia Schmucker (forthcoming), ‘Governing
Macroeconomic Surveillance in the G20 and the EU: A First Assessment of
MAP and MIP’.
3. See also Claudia Schmucker and Katharina Gnath,‘The G20 Five Years On:
Focus on the Core Tasks!’, 2013, DGAPanalysis 5/2013, German Council
on Foreign Relations, Berlin, https://dgap.org/en/think-tank/publications/
dgapanalyse-compact/g-20-five-years-focus-core-tasks.
4. G20, Los Cabos Growth and Jobs Action Plan, www.g20.utoronto.
ca/2012/2012-0619-loscabos-actionplan.html.

49
7
G20 economic priorities for 2014: reforming
the MAP
Stephen Pickford1
Chatham House
The G20 was elevated to a leaders-level forum in November 2008. It had
initial successes in coordinating an international response to the economic
and financial crisis, and there were high hopes that it could evolve from a
crisis committee to a central forum for steering the world economy in more
normal times – the ‘premier forum for international economic cooperation’.
Since those early days the G20 has struggled to emulate those
achievements, both on its core economic and financial issues, and across the
broader range of issues that successive summits have added to the agenda.
This paper argues that the G20 currently faces a number of structural
problems, both specifically related to its core economic mandate and more
generally. It also argues that unless these can be addressed, the G20 will
find it increasingly difficult to maintain its current relevance, let alone
realise its full potential as a central forum for active international economic
cooperation. The next couple of years will be key in determining whether
the G20 has a long-term future, or whether countries will increasingly
turn to other organisations and fora to achieve the level of cooperation
they desire in an increasingly integrated global economy.

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50
Former successes and current failings
The G20’s early achievements in helping to deal with the global financial
and economic crisis have been well-documented, including: the provision
of coordinated liquidity, and international resources for crisis countries;
well-orchestrated fiscal stimulus measures; and an action plan to address
failures in financial regulation.
The Pittsburgh summit also put in place a G20 structure to address
economic imbalances and spillovers between countries. The Mutual
Assessment Process (MAP), which underpins the G20’s Framework for
Strong, Sustainable and Balanced Growth, was intended to be a forum for
mutual assessment, evaluation, discussion and coordination of national
economic policies in order to deliver better global outcomes.
In the subsequent summits, communiqués continued to refer to progress
on these core economic issues. But, in addition, greater attention was paid to
wider issues, including development; trade; climate change; energy security
and commodity markets; corruption, tax havens, money laundering and
terrorist financing; the marine environment; and financing for investment.
The G20 also has a mixed record in implementing leaders’ agreements.
The G20 Research Group published a comprehensive study of the
implementation of G20 summit commitments in December 2012, which
concluded that overall implementation was partial.2
Implementation has generally been more successful where an existing
technical body has been tasked by the G20, and empowered to drive
through reforms agreed by the G20 leaders at a political level. Financial
sector reform is one example of this, where the Financial Stability Board
(FSB) was strengthened to effectively become an instrument of the G20,
formulating detailed plans to action political agreements, and overseeing
implementation. National implementation of some financial reforms has
been patchy, but overall progress on the financial reform agenda since
2009 has been impressive. Major reforms have been put in place: capital
buffers and leverage ratios; oversight of systemically important financial

51
G20 economic priorities for 2014
institutions (SIFIs); recovery and resolution planning; over-the-counter
(OTC) derivatives; shadow banking; and so on.
There are a number of ‘environmental’ reasons for this decline in the
G20’s performance: the overriding sense of urgency has fallen away as
the crisis has abated; some of the problems facing the G20 are now more
national or regional, rather than truly international; and as the ‘quick wins’
were banked, the issues have become harder to solve.
Structural flaws
But there are other factors connected to the structure of the G20 that
have hampered its effectiveness as a decision-making body. The need for
consensus tends to result in ‘lowest common denominator’ agreements.
Also the ‘rotating presidency’ format, while it encourages ownership, works
against effective leadership and strategic direction. The reluctance to drop
issues from its agenda has led to a lack of focus. And implementation
of joint decisions has been hampered by an unwillingness to sanction
members that fail to comply.
These issues apply to the full range of the G20 agenda. But they are
particularly relevant in the core economic sphere, which was the original
raison d’être for the G20.
The MAP itself has evolved over time, and the issues it focused on have
changed. At the outset, the MAP was intended to help countries shift the
balance of demand, both internally and externally,3
so that deficit and
surplus countries could adjust imbalances relatively smoothly and avoid
a ‘hole in demand’ globally. But as the crisis abated, the priority shifted
to managing medium-term fiscal consolidation weakened by the crisis
without jeopardising economic recovery. The euro area crisis flared up in
2011, but the MAP did not adequately address this. Instead, subsequent
summits have focused on longer-term structural reforms.4
Given the changing nature of the economic problems facing the
global economy over the last five years, it was appropriate that the MAP

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52
responded to new issues as they became more prominent. But, in common
with the wider G20 agenda, the MAP has found it difficult to reprioritise,
instead adding new issues without deprioritising others. As a result, the
MAP agenda has grown, so that it now covers the entire range of fiscal,
monetary, financial and structural policies.5
To some extent, the G20 economic agenda has also been hijacked
by wider presidency priorities. For example, the Cannes summit was
dominated by the euro area crisis. But the Los Cabos summit shifted the
main focus onto development issues. And the St Petersburg summit was
overshadowed by the Syrian crisis.
The overriding need for consensus has also been a feature of the MAP
from the outset. For instance, as the list of MAP indicators was being
developed, there was great reluctance by emerging markets to include the
current account position of countries in the list, for fear that it would be
used to attack the build-up of large surpluses.
The MAP has, of course, had its strengths. Compared to previous
attempts at international policy coordination, the MAP has been:
‘owned’ by the G20 countries, since they primarily drive
the process
able to access high-quality inputs and technical expertise, in
particular from the IMF, the OECD and the World Bank
involving the finance ministries and central banks of all the
major economic players, and
fully transparent on both inputs to and outputs from the process.
It also has the potential to become a more effective process by which
countries can critique each others’ policies and catalyse efforts to minimise
negative spillovers between countries.
But this will not happen without changes. The MAP has no enforcement
mechanism, other than public embarrassment. And the need for consensus
has resulted in relatively modest policy commitments by countries, in many
cases going no further than previously announced policies. Also, it is not

53
G20 economic priorities for 2014
clear that it is possible to have detailed and comprehensive negotiations
with 40-plus institutions represented in the room.
Generic suggestions for G20 processes
Some of the ways in which the G20 can address these flaws and improve
its processes are:
setting strict time limits and sunset clauses for issues, and
limiting the presidency’s discretion for adding new issues
allowing subsets of G20 countries to move ahead on issues that
are particularly important to them (while avoiding this opening
up rifts with other G20 members)
establishing more common ownership of each year’s agenda by
reducing the discretion of the presidency (through a permanent
secretariat, or improved ‘troika’ processes, for example)
setting out clear timelines and accountabilities for
implementation of decisions, preferably tasking relevant
institutions with taking them forward, and requiring regular
progress reports.
Some modest MAP-specific proposals
But changes also need to be made to the MAP, to make it more relevant in
the future and establish it as a key component of international economic
policy cooperation. A change in mindset and approach by countries is
required, but changes to its structure and processes can also help.

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54
Three areas for improvement are particularly important:
focusing on the right issues
developing better processes to deal with difficult issues
maximising buy-in at the highest political levels.
Given the proliferation of the MAP agenda, it is important to find ways
to bring emerging issues to the table, but also to prioritise issues. Two
specific suggestions are that:
the G20 should adopt a work program for the coming year,
based on the highest priority issues raised in the latest IMF
World Economic Outlook (WEO). (So, for example, the IMF’s
October 2013 WEO and Managing Director’s priority agenda
highlight three main issues: the speed of fiscal adjustment;
completing the process of repairing financial institutions’ balance
sheets; and managing the volatility of capital flows.)6
Finance Ministers and Governors should be tasked with
presenting to leaders at the summit a set of concrete proposals
for actions to address each of these priority issues.
The MAP is already in some ways over-engineered, and because of this,
it is less likely that contentious issues will be dealt with. It will obviously
be less comfortable for countries to be forced to confront difficult issues;
and if ministers and governors (supported by the work of their officials)
are required to present proposals to leaders, this will highlight where
agreement in advance of the summit is impossible. But continuing to avoid
these issues simply ensures that they remain unresolved. Possible ways to
correct this bias are to:
publish at the start of each presidency the MAP program and its
priorities for the coming year

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